Wednesday, February 4, 2009

Obama-mania Fading; Good News for the Economy?

Unfortunately for a blog focused on markets and economics, it's all politics all the time with the major issue of the day, the insolvent giant financial institutions. Herewith are two relevant articles from today. First, from perhaps the most unforgiving mainstream Bush-basher, Maureen Dowd, comes "Well, That Certainly Didn't Take Long":

On 9/11, President Bush learned of disaster while reading “The Pet Goat” to grade-school kids. On Tuesday, President Obama escaped from disaster by reading “The Moon Over Star” to grade-school kids. “We were just tired of being in the White House,” the two-week-old president, with Michelle at his side, explained to students at a public charter school near the White House.Even as he told the children his favorite superheroes were Batman and Spider-Man, his own dream of being the superhero who swoops in to swiftly save America was going SPLAT! It just ain’t that easy.

Unlike W. and Dick Cheney, who heroically resisted acknowledging their historically boneheaded mistakes, President Obama summoned a conga line of Anderson, Katie, Brian, Chris and Charlie to the Oval Office to do penance, over and over.

“I think I messed up. I screwed up,” he confessed to Couric.

He told the anchors that the man who helped make him president, Tom Daschle, had made “a serious mistake” by not paying taxes on a car and driver. (It should have been a harbinger of doom when Daschle began sporting those determined-to-be-hip round red glasses.)Mr. Obama admitted that “ultimately it’s important for this administration to send a message that there aren’t two sets of rules. You know, one for prominent people and one for ordinary folks who have to pay their taxes.”

It took Daschle’s resignation to shake the president out of his arrogant attitude that his charmed circle doesn’t have to abide by the lofty standards he lectured the rest of us about for two years.Before he recanted, his hand forced by a cascade of appointees who “forgot” to pay taxes, his reasoning was creeping perilously close to that of the outgoing leaders he denounced in his Inaugural Address: that elitist mentality of “we know best,” we know we’re doing the “right” thing for the country, so we can twist the rules.

Mr. Obama’s errors on the helter-skelter stimulus package were also self-induced. He should put down those Lincoln books and order “Dave” from Netflix.

When Kevin Kline becomes an accidental president, he summons his personal accountant, Murray Blum, to the White House to cut millions in silly programs out of the federal budget so he can give money to the homeless.

“Who does these books?” Blum says with disgust, red-penciling an ad campaign to boost consumers’ confidence in cars they’d already bought. “If I ran my office this way, I’d be out of business.”

Mr. Obama should have taken a red pencil to the $819 billion stimulus bill and slashed all the provisions that looked like caricatures of Democratic drunken-sailor spending.

As Senator Kit Bond, a Republican, put it, there were so many good targets that he felt “like a mosquito in a nudist colony.” He was especially worried about the provision requiring the steel and iron for infrastructure construction to be American-made, and by the time the chastened president talked to Chris Wallace on Fox Tuesday, he agreed that “we can’t send a protectionist message.”

Mr. Obama protested to Brian Williams that the programs denounced as “wasteful” by Republicans “amount to less than 1 percent of the entire package.” All the more reason to cut them and create a lean, clean bill tailored to creating jobs.

The Democratic president has been spending so much time trying — and failing — to win over Republicans that he may not have noticed the disillusionment in his own ranks.

Betrayed by their bankers and leaders, Americans were desperate to trust someone when they made Barack Obama president. His debut has left them skeptical about his willingness to smack down those who would flout his high standards or waste our money.If someone had told me a month ago that Maureen Down would be calling Barack Obama "arrogant" less than two weeks into his Presidency, I'd have said "Wow" - and so it is said! What will this do to Mr. Obama's plans for the economy? The Washington Post reports in "Senate Lacks Votes to Pass Stimulus":

Senate Democratic leaders conceded yesterday that they do not have the votes to pass the stimulus bill as currently written and said that to gain bipartisan support, they will seek to cut provisions that would not provide an immediate boost to the economy.

Of course, all this is a charade to some extent. The items discussed in the Post article that may get cut but relate to health may well be funded in other bills. But overall, the quick take here is that matters are reminiscent of the early days of Bill Clinton's first term, when despite control of Congress by his party he had trouble getting his early priorities through, had to sharply lower his tax increases, and even in a good economy couldn't get his priority, the reshaping of the health care system, to a floor vote.

The belief here is that to the extent that the economy is allowed to recover on its own, with terminally ill financial institutions allowed to die in a managed manner, the better for the economy. We must recall that Herbert Hoover and his party helped cause the Great Depression by passing legislation known as Smoot Hawley. The Post article goes on to state:

Extensive Senate revisions would force lawmakers to work at a frantic pace to meet a self-imposed Feb. 13 deadline for completing a compromise bill with the House, which passed an $819 billion version last week. Obama reiterated his call for urgent action in a meeting Monday night with Democratic leaders . . .We learned in internship some rules in responding to a medical emergency. Among them were:

In a code, the first thing to do is take your own pulse; and,Walk, don't run to a cardiac arrest. You'll alarm the other patients. (Walk very fast.)

It is hoped here that the World's Greatest Deliberative Body, which appeared not to do much deliberating last year as the financial and economic mess was unfolding, will not lurch in the other direction and pass something unsound because it is frantic to meet a self-imposed deadline. There is only one thing wrong with the U.S. economy, and it is profound: too much debt and on a larger scale, to much "financialization" overall and not enough provision of real goods and services. There is probably nothing in the "stimulus" bill that will help that, and a great deal that would kick the can the wrong way down the road. Right now we are on a one-way road, but we can do a U-Turn and make the one way go in the other direction and get back, get back to where we once belonged.